Top 3 Workers' Compensation Trends for Staffing Firms & PEOs

We’re looking on the bright side. Here are three healthy workers’ compensation (WC) trends our team is seeing for staffing and PEO companies this year:

1. Signs of improvement – At long last, WC results are broadly showing signs of improvement. The National Council on Compensation Insurance (NCCI) indicates that the estimated WC combined ratio for 2015 is approaching 96 – a whopping 19-point decrease from 2010. What exactly is a combined ratio? It’s a measure of how healthy an insurance carrier’s results are.

To calculate a combined ratio, the sum of the carrier’s incurred losses and expenses are divided by its earned premium. A ratio above 100% indicates the carrier is paying out more money in claims than it’s receiving from premiums. A ratio below 100% indicates the opposite. The healthier a carrier’s loss results are, the longer it will stick around to insure you.

NCCI President and CEO Steve Klinger reports, “Today, industry costs are largely contained, claims frequency continues to decline and the system in most states is operating efficiently. In short, the market is operating as it should on behalf of most stakeholders.”

Strong risk management practices will help keep this trend moving in the right direction.

2. Healthier underwriting environment – Taking point one into consideration, 2016 will bring us more stability in the marketplace. We’ll find fewer WC carriers are “on the brink”. This is a big deal for staffing firms & PEOs. Less carriers on the brink means more options for you to choose from and healthy market competition.

Let’s take a trip down memory lane. In late 2013, Liberty Mutual announced it was non-renewing their staffing & PEO book of business. In 2014, Freestone Insurance (f/n/a Dallas National) was placed into liquidation. Also in 2014, Tower was downgraded by A.M. Best to the point at which it was sold to AmTrust. Unfortunately, Tower’s staffing book of business was not part of that transaction. 2015 brought the demise of LUA (Lumbermens Mutual), which is now in liquidation. These carrier exits (willing or not) resulted in decreased market capacity for the industry.

3. ACA impact on WC – Is there a correlation between a healthy workforce and lower WC costs? Yes. Is the workforce as healthy as it can be? Certainly not. But it’s a promising trend that will bring with it lower WC costs.

The introduction of the Affordable Care Act (ACA) individual mandate requires everyone to carry health insurance. The main focus of the ACA is preventative care (e.g. biometric screenings, regular check-ups, wellness program participation…etc.). It’s still too early to identify a national correlation between the ACA and WC claim trends. But that doesn’t mean it’s not a metric that may become as popular as your WC loss ratio in the future.

Will companies that have a wellness program (that extends beyond their “in-house” associates) reap the benefit of lower WC costs? Hopefully! The metric starts with you. Are you encouraging your employees to make healthy choices? More importantly, do you make it easy for them to do so?

The WC info doesn’t stop there. We have plenty of additional WC tips and trends in our brand new WC e-book. Download it now!

Senior Vice President and Practice Leader, Diane Poljak is member of Assurance’s senior leadership team and is responsible for overseeing the staffing & PEO practice. Tapping into over 20 years of industry experience, Diane is responsible for the overall vision and strategy of the staffing & PEO team. She serves a key role in advising Assurance’s insurance consultants as well as creating and maintaining strategic relationships with insurance carriers and other vendor partners. Diane graduated from Butler University with a degree in Marketing. She also possesses an Associate in Risk Management (ARM) designation and is an active member of multiple trade associations, including the American Staffing Association (ASA).